Whether you have just opened your small business, or you have been operating it for a while, your goal is often to increase the amount of profit that you make. Keeping your taxes low is 1 way to improve your bottom line. Most small business tax exemptions are designated as business expenses (the cost of doing business) or capital expenses (the cost of purchasing assets for your business). Find tax exemptions for your small business by consulting experts on which exemptions exist for small businesses, and claiming those you are eligible for.

Steps

Method1

Resources for Small Business Tax Deductions

1

Look for deductions on the Internal Revenue Service (IRS) website. The IRS provides a list of what small businesses can deduct, and an explanation of those deductions.

Take an IRS tutorial. The website provides virtual tax workshops for small business owners.

2

Check for deductions with the Small Business Association (SBA). This organization provides information and help on its website, http://www.sba.gov

Use the SBA as a resource if you are just starting a business. It provides information on how to begin a business, and which tax deductions to pay attention to.

3

Talk to your accountant or tax professional. Whether you have an in-house finance team or at consultant you work with at tax time, make sure you get all the information you need on your eligible small business tax deductions.

Method2

Types of Small Business Tax Deductions

1

Deduct your auto expenses, if you use your car for business. You are only able to deduct the mileage and usage for your business purposes. Your personal use cannot be deducted.

2

Deduct the capital expenses of starting a business, if this is your first year of operation.

Find the amount you may deduct for things such as utilities, advertising and office supplies in your first year of business. The maximum you can deduct is currently $5,000, but the law may change (for example, in 2010 the maximum was $10,000).

3

Add up your legal and professional fees. These are deductible if the lawyers, tax professionals or other consultants you hire are performing work for the current filing year.

4

Use bad debts as a deduction if you provide a product. When a customer does not pay for a product you sell, you can write off the debt as a tax exemption. This does not apply to a small business that provides services.

5

Evaluate your business entertaining expenses. You can deduct up to 50 percent of your entertaining costs if you paid to feed or entertain current or potential clients.

6

Deduct travel expenses. All of the travel costs, including airfare, taxis and meals can be deducted when the purpose of travel was for business.

7

Use new equipment as a tax deduction. If your small business purchases a new asset, you can either write off the full cost of the equipment the year you buy it, or capitalize it over several years.

Talk to your tax professional about which deduction is best. You may also need help determining whether your asset qualifies. For example, inventory purchased for resale and real estate are not tax deductible.

8

Check any computer software you may have purchased. Some software can be deducted in the year it was purchased, or it has to be depreciated over 3 years.

9

Make a charitable contribution. If your small business gives money or equipment that has not been depreciated to charity, you can deduct that contribution.